Owning a house has become more important than just having a place to sleep to certain people. In the United States, if good credit is obtained with a decent job that can pay a monthly mortgage, purchasing a home is not a bad idea. However, some would much rather to rent for various reasons. Purchasing a home is long and extremely stressful process but well worth the investment if qualified. Buying and selling can be a tricky prospect in these markets (Razzi & Stevenson, 2002, pg. 81). Some are frightened over the markets rising and falling prices, not to mention the fluctuating interest rates. This however shouldn’t scare anyone away from investing into a home. Or is renting an easy way out from the stress. From home buyers to renters, seeking professional help or guidance on a potential home can save anyone from headaches they aren’t ready for.
One of the biggest decisions that anyone can make in their life is to purchase a home. Some homebuyers may wonder if this decision to purchase a home is the right one, since the average person changes their mind every five to seven years. Taking this information into consideration, many people tend to contemplate if purchasing a home is actually the best option for them. However, there are many advantages to purchasing a home, just as there are disadvantages, which means renting may be the better option for them. The best way to know whether buying or renting is the better option, the person must look at their situation in order to make the more logical decision. There are cases in which the cost of ownership can be less than renting. Meaning your investment stays with you as profit down the road if selling is an option.
The owner also experiences less regulations that they must abide by, which includes restrictions as far as children, noise violations, and pets. Unlike a person renting, the home owner also has personal freedom by having the capability to redecorate, remodel, or make improvements as needed, which is not usually an option when renting. When mortgage payments are made on time, the homeowner can achieve a better credit rating meaning full control of their score. With many advantages in owning a home, there are some things that buyers need to know and be aware of before purchasing a home. As a home owner, the mortgage payment isn’t the only responsibility they have. There are also taxes, insurance, maintenance, and repairs to be concerned with. Not, to forget if the property has a Home Owner’s Association fee or a CDD fee for the community. These are common fee’s for communities to upkeep cleanliness, lawns, security, laws, and many other regulations. After buying a home, there is not much flexibility when choosing a new job in another town or any flexibility in moving more often to more desirable locations or areas. If these disadvantages aren’t an issue to the future home owner, then they need to assess their qualification. “Owning a home is a financial commitment that requires you to plan ahead and reflect on where your life is headed. Before deciding whether to rent or buy, ask yourself what your budget is and if either choice would require you to stretch your finances,” (Bank of America, pg. 1).
The first step to buying a house is assessing the individual’s financial situation, how much debt is obtained versus how much in assets is saved (debt to income ratio.) This can be done by the individual but highly advised to be completed by an authorized lender. After the review, trying to pay off some debt is a plus, and putting some money aside for the rainy days will show responsibility and great money management. Then the bank or finance agent will evaluate how much the home buyer pre-qualifies. The pre-qualification states budget according to the debt to income ratio. This will allow the home buyer not to make a financial mistake putting them in a position where they can’t afford the home later down the road. With many lending companies to choose from, different factors determine what the interest rate would be such as credit and payment history. Also, the amount of the down payment makes a huge impact on the amount of the monthly mortgage.
Keep in mind, the larger the down payment is, the easier it is to get a lower mortgage rate. The second step is to find a good real estate agent who assists buyers by finding the best house and helps them purchase property for the best possible price under the best terms. Getting a realtor is not always necessary, but if you are a first-time buyer, it is recommended to have one. Do not forget that realtors get paid by the seller, but they work for the buyer. When the buyer finds a house that suits them best, they should start to do research about the house. Learning about the latest sales in the neighborhood, the tax value, and the next ten- or fifteen-years development plan for the area the house is in. If satisfied with the search results, the realtor writes an offer letter to the seller’s agent. The offer should be a good deal to both the seller and the buyer. Sometimes this process takes a long time but can move rapidly with the right realtor on the sidelines.
Owning and renting each have their advantages, but what’s best for you depends on your circumstances. Many like the advantages of renting over owning a home. For starters, the initial investment to rent is significantly less than the 20% down on buying a home, meaning renting is more cost efficient in certain cases. The funds that would be used towards a high mortgage rate or a down payment can be put into a savings account for many other necessities or pleasures.
Also, not having to do repairs saves the renter money and time having the limited responsibility, the landlord is responsible for the repairs. But when owning a home, all the costly repairs fall on the owner. When it comes to property taxes as well, the renter has less impact on their finances because this property tax fluctuates from year to year and it’s a responsibility of the owner. Now the renter can manage the homes budget easier since the rent won’t fluctuate as an owner’s mortgage can. Depending on where a home is rented or who the landlord is, there’s possibilities that utilities are included in the fixed rent amount which is a huge bonus to the renter meaning one less bill needed to be worried about. With the usual short-term leases, the renter also has more flexibility and mobility with moving as desired more frequently.
The insurance costs are significantly lower as well for renters because only the belongings inside the rental property must be insured, not the structure of the home. Despite the advantages of renting there are things needed to be taken into consideration before choosing to rent. When renting, going over the lease several times before signing is key, so that the renter knows the terms on the agreement before signing. The lease is legally binding when it comes to the lender’s rights and the living arrangements. Also, the renter needs to be aware on how to protect their security deposit, this can be done by thoroughly completing a visual home inspection while documenting any damage in the home prior to signing the lease. This serves as insurance for the security deposit belonging to the renter. The personal rental insurance policy protects the renter against damage and losses due to robbery, fires, flooding, and other adverse events.
